Canada deflects blame for U.S. dairy woes

At issue are changes in Canadian policy that make it harder for U.S. dairy processors - like Grassland Dairy Products of Greenwood - to sell their ultra-filtered milk, used to make cheese, in Canada.(Photo: John Oncken file photo)

Canada says it's being wrongly blamed for a decision by a major dairy processor that could put some Wisconsin farms out of business in less than three weeks.

At issue are changes in Canadian policy that make it harder for U.S. dairy processors — such as Grassland Dairy Products of Greenwood — to sell ultra-filtered milk, used to make cheese, in Canada.

The policies are "choking off sales of American milk to the detriment of U.S. dairy farmers," said Tom Vilsack, former U.S. Agriculture Secretary and now president of the U.S. Dairy Export Council.

Grassland notified about 75 Wisconsin farms that as of May 1, it is canceling their contracts because it has lost its Canadian business.

"The Canadian government has put in place several regulations to prevent this trade from continuing," the company said in a letter to the farmers.

Others in the U.S. dairy industry share that sentiment.

"The reality is that Canadian provinces, starting last year with Ontario and now extending across the nation, are implementing what they call a 'national ingredients strategy.' This lowers the cost for processors to buy Canadian-made milk ingredients, undercutting the sales previously made by Grassland and other companies to Canada," said Chris Galen, a senior vice president at the National Milk Producers Federation based in Arlington, Va.

"Canada isn't taxing or levying tariffs on U.S. exports but instead is changing the pricing structure of its own milk supply to provide preferential pricing treatment for domestic suppliers," Galen said.

Not so fast on placing that blame, say Canadian farmers, who fault the U.S. for producing too much milk in a global marketplace flooded with it.

"We don't feel good about U.S. farms going out of business. But you know what? It's not our responsibility. It's your own responsibility, as a country, to manage your production," said Isabelle Bouchard, director of government relations for the trade group Dairy Farmers of Canada.

“We don't feel good about U.S. farms going out of business. But you know what? It's not our responsibility. It's your own responsibility, as a country, to manage your production”

Isabelle Bouchard, Dairy Farmers of Canada

"We are a nation of 36 million people, less than the population of California. How do you expect us to (consume) your over-supply of milk when we already produce milk for our market?"

Members of Congress from Wisconsin and New York, the two states affected, say they're bringing the issue to President Donald Trump who has pledged to renegotiate the North American Free Trade Agreement with Canada and Mexico.

But the issue is about economics and business decisions, not trade policy, according to Canada.

"The truth is, both the U.S. and world dairy markets are currently over-saturated, which has led to low prices at the farm gate and a lower price received by the processors. Simply put, in the U.S. and around the world, too much milk is being produced. ...The end result is loss of income for farmers, and in some cases farmers having to shut down their farms," Dairy Farmers of Canada said in a written statement.

"By contrast, in Canada, supply management — literally matching supply with demand — avoids overproduction and reduces the impact of devastating market fluctuations such as those the U.S. is currently experiencing."

In response to a changing market, Canada says it implemented a new milk-product class aimed at making its farmers more competitive with the U.S. That's, essentially, at the core of the dispute.

"We are not a dumping ground for the U.S.," Bouchard said.

The strength of the U.S. dollar, which makes American products more expensive in Canada, has made the problem worse for Wisconsin.

Canadian interests say there's no quick fix to the global problem of a glut of milk.

"Some have reverted to making Canada the source of the woes for the dairy industry in the United States, rather than admitting to having no ready-made solution. This may buy time but does little to help dairy farmers or processors," Jacques Lefebvre, president of Dairy Processors Association of Canada said in an April 8 letter to Chad Vincent, CEO of the Wisconsin Milk Marketing Board.

"We certainly empathize with the problems faced by the industry in the United States, which stem from over-supply of milk and the ensuing difficulties for some processing plants to keep up. We too experience these challenges in Canada. Unfortunately, this problem goes beyond our two countries. It is a global one," Lefebvre wrote.

The top farm leaders in Wisconsin and New York have urged the U.S. Department of Agriculture to step in and help farmers who may go out of business because of the loss of Canadian business.

When Grassland stops picking up their milk, effective May 1, they have no place to ship their product in an already oversupplied market.

For some farmers, the only solution could be to sell their cattle and shut down their business.

Dairy farmer Jennifer Sauer, of Waterloo, said she and her husband, Shane, are urgently seeking a processor for the milk from their 120 cows on their third-generation family farm. The April 1 letter canceling their milk contract because Grassland lost its Canadian business shook them badly.

"We are fighting the time clock," Sauer said Tuesday.

"I understand that everybody is working to try and get something solved, but there's no good answer right now. These cows aren't machines. You can't just shut them off," she said.